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The strange embrace of Government and Community Sector grows

By 19 November 2012 7

Andrew Barr has announced his plans to give more money to the community sector organisations so they can pay the same sorts of salaries as government employees.

For those coming in late the whole thing is one hell of a way to run a railroad.

A Government concerned by the cost of service delivery asks notionally non-profit organisations (one man’s profit can look a lot like another’s executive salary) to tender to deliver the services.

Traditionally those orgs have found cheaper ways to do things by delivering inferior more efficient services or finding staff willing to work for less.

But now the orgs are having to pay staff at government levels the government is going to pay extra money for those staff costs.

Which seems like a hell of a way to go about paying lots of extra CEO salaries for little gain.

On the other hand in the event of an egregious cockup a contract can be terminated rather than a minister resigning.

So that might be a big part of the appeal of the arrangements.

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7 Responses to The strange embrace of Government and Community Sector grows
#1
EvanJames3:14 pm, 19 Nov 12

Many of those non-profit service providers already have a facility for paying higher wages. It’s little-known outside non-profits, but the health sector in particular makes full use of it (including NSW state health, interestingly enough).

It’s a FBT thing, where these entities can hike an employee’s pay by $16000 or thereabouts, by some tax-free tangle that no one can clearly explain. You have to show the money is going to pay for things, not as cash, so that portion of your pay has to go into a credit card, mortgage, payment card etc, but it’s easily got-around. It’s not means-tested, many of the doctors and execs in NSW Health were on it, and I know quite a few non-profits in Canberra utilise it.

I hope they told Mr Barr about this…

#2
rosscoact5:38 pm, 19 Nov 12

The favourable FBT arrangements were introduced specifically to help attract people to the community sector because they are underpaid.

#3
mmillercfp5:47 pm, 19 Nov 12

EvanJames, I can explain how the FBT benefits work, not so sure about why they chose to do it that way though!

#4
CanberraMum7:04 pm, 19 Nov 12

Surely not, does no-one in the ACT Government understand economics….Do they not listen to their Treasury staff..? market forces people, market forces….it is not the role of my taxes to pay wages…

#5
clj7:18 pm, 19 Nov 12

Health sector is about $9000/year FBT exempt salary packaging, public benevolent institutions $16050 per year. Which works out to maybe up to $5000 in tax savings. I think it’s fair, they can’t afford to pay competitively otherwise, and they need good staff as much as any other sector.

#6
HardBallGets7:55 pm, 19 Nov 12

EvanJames said :

Many of those non-profit service providers already have a facility for paying higher wages. It’s little-known outside non-profits, but the health sector in particular makes full use of it (including NSW state health, interestingly enough).

It’s a FBT thing, where these entities can hike an employee’s pay by $16000 or thereabouts, by some tax-free tangle that no one can clearly explain. You have to show the money is going to pay for things, not as cash, so that portion of your pay has to go into a credit card, mortgage, payment card etc, but it’s easily got-around. It’s not means-tested, many of the doctors and execs in NSW Health were on it, and I know quite a few non-profits in Canberra utilise it.

I hope they told Mr Barr about this…

Practically the entire ACT Health Directorate is eligible (according to the organisation’s self-assessment) and all but about 50 sacrificial lambs are able to claim PBI status.

#7
James_Ryan6:30 pm, 20 Nov 12

HardBallGets said :

Practically the entire ACT Health Directorate is eligible (according to the organisation’s self-assessment) and all but about 50 sacrificial lambs are able to claim PBI status.

The rules say that “Public Hospitals and Public Benevolent Institutions (PBIs) are permitted to pay their staff a limited amount of fringe benefits without having to pay Fringe Benefits Tax”.

Having almost the entire ACT health department claiming to be part of a “public hospital” however is clearly a rort of delicious proportions.

If the rumours are true, then the health department’s finance division did the self assessment. I wonder if they ruled themselves PBI eligible or not?

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